Now, the Knobe Effect is of interest to me for a couple of reasons. The main one is that I have been thinking about the emotional content of the tax avoidance debate and how the words ‘avoid’ and ‘dodge’ have become quite emotive.

Too emotive, I feel. They seem to have inherently negative connotations (to me), and this derives from the element of intent suggested by the words.

I think the “avoiding” or “dodging” of tax requires a person to actively participate. It requires an assessment of what will happen without any action and then an intentional action intended to circumnavigate the outcome.

And this is where I think the Knobe effect comes in. If you change the subject of the experiment from the environment to tax (you’ll need to read the wikipedia summary), I predict you wouldn’t see a significant change in behaviour. Of course tax has an effect on profit, so you might need to change the motive of profits to something else.

But I guess people would see a reduction in tax and presume it is intentional.

I’m not talking about pre-arranged schemes which are sold as investments. Clearly these are intentional. Instead, I’m thinking of something like transfer pricing, essentially a function of compliance, where there has to be an appropriate amount decided.

If a TP calculation were to raise the tax profile of a group, I feel people would assume this were not intentional. On the other hand, were the TP calc were to reduce the tax profile of a group, people would assume this were intentional.

Anyway, that’s my opinion of what you would see, but I might have to test this myself.

2 Responses to The Knobe effect

I suspect that what the Knobe experiment does is test the level of agreement people have with certain models of the world.

The basic test, with the CEO making profit and affecting the environment, compares two models:

A) Big business is pro-profit and anti-environment
B) Big business is pro-profit and pro-environment

I think model A is how people tend to think of big business. The proposal harming the environment therefore fits with the stereotype and so registers as relevant. The proposal helping the environment doesn’t fit that sterotype, and so doesn’t really register: that aspect gets discarded as an irrelevance.

So you can use the method to explore people’s mental models by seeing what gets flagged as relevant.

With tax, I think most mental models include “reduction in tax” as being something people aim for. I’d hypothesise that you’d get a stronger correlation the bigger the business you’re talking about. So if you compared something like:

A) A plumber earns £30,000 a year. He is looking at buying a new van, and the tax deduction for it will mean he pays no tax on his profit this year. Does the plumber intend to avoid tax?

and

B) A company earns £30m profit a year. It is considering building a new factory, and the tax deduction for it will mean it pays no tax on its profits this year. Does the company intend to avoid tax?

I think you’d get a stronger “yes” vote with B.

I think you’d also get a stronger correlation if the company in B were in the arms or financial services sectors than if it were something like an organic food company using fairly traded ingredients. The more commercial and hardnosed the company appears to be, I think the more likely people would be to see the tax reduction as an objective rather than a side effect.

So I don’t think it’s a question of moral values, I think it’s a question of conforming to stereotypes.

I think that’s probably right and helps explain the level of difference in the results that Knobe got. I had wondered what the effect would be were you to substitute “CEO” for “Director of the charity”, or something similar. I’m sure it would have an impact.

There’s certainly a lot of that preconceived impression in the tax debate. My impression is that people have been more severe with Starbucks than Jimmy Carr because of that factor, notwithstanding the fact that one doesn’t appear to be avoidance at all and the other is.